The Market Forces of Supply and Demand: Prof. Dr. Yunastiti Purwaningsih, MP

3
The Market Forces of Supply and Demand
Mankiw, N.Gregory. 1998. Principles of Economics.

Hartcourt Brace & Company.
(Terjemahan oleh Haris Munandar & Emil Salim. 2000. Penerbit Erlangga. Jakarta)
Prof. Dr. Yunastiti Purwaningsih, MP

Copyright © 2004 South-Western
yst_stm
• Supply (S) and demand (D) are
• the two words that economists use most often.
• the forces that make market economies work.
• market equilibrium.
S dan D  equilibrium = keseimbangan pasar
yst_stm

MARKETS AND COMPETITION
• A market is a group of buyers and sellers of a

particular good or service.
• The terms supply and demand refer to the behavior

of people . . . as they interact with one another in
markets.
yst_stm

MARKETS AND COMPETITION
• Buyers determine demand
• Sellers determine supply
yst_stm

Competitive Markets
• A competitive market is
a market in which there are many buyers and
sellers so that each has a negligible impact on the
market price…tindakan setiap penjual dan pembeli tidak
berdampak pada kinerja pasar
yst_stm

DEMAND
• Quantity demanded is the amount of a good that
buyers are willing and able to purchase.
• Law of Demand
• The law of demand states that, other things equal,
the quantity demanded of a good falls when the price of
the good rises (jumlah barang yang diminta = Qd turun
bila harga = P barang naik).
P ↑ ↓  Qd ↓ ↑ cp
yst_stm

DEMAND
P ↑ ↓  Qd ↑↓ cp
Dx = D (Px, | pendapatan, P barang lain yang
berhubungan, selera, ekspektasi, jumlah
pembeli)
Dx = D (Px) ceteris paribus (pendapatan, P

barang lain yang berhubungan, selera,
ekspektasi, jumlah pembeli) semua
konstan/tidak berubah Copyright © 2004 South-Western
Catherine’s Demand Schedule
tabel hubungan antara P dan Q yang diminta
yst_stm

Figure 1 Catherine’s Demand Schedule and Demand Curve
Price of
Ice-Cream Cone
$3.00
2.50
1. A decrease
2.00
in price ...
The demand curve was 1.50

drawn under the
assumption that all 1.00
factors, except for
price, that influence 0.50
the quantity demanded
is fixed. 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of
Ice-Cream Cones
demand curve : kurva 2. ... increases quantity
hubungan antara P dan Q of cones demanded. yst_stm
yang diminta ceteris paribus Copyright © 2004 South-Western
Market Demand versus Individual Demand
• Market demand refers to the sum of all individual

demands for a particular good or service….
Permintaan pasar : penjumlahan
permintaan individu
• Graphically, individual demand curves are summed
horizontally to obtain the market demand curve….
Secara grafis : penjumlahan secara
horinsontal
yst_stm

Market Demand versus Individual Demand

yst_stm
Shifts in the Demand Curve
• Change in Quantity Demanded

(perubahan jumlah barang yang diminta)
• Movement along the demand curve – pergerakan
sepanjang kurva.
• Caused by a change in the price of the product –
disebabkan perubahan harga.
Dx = D (Px, | pendapatan, P barang lain yang berhubungan,
selera, ekspektasi, jumlah pembeli)
Dx = D (Px) ceteris paribus (pendapatan, P barang lain
yang berhubungan, selera, ekspektasi, jumlah pembeli) semua
yst_stm
yst
Changes in Quantity Demanded

Price of
Ice-Cream A tax that raises the price
Cones
of ice-cream cones
B results in a movement
$2.00 along the demand curve.
Dx = D (Px) ceteris paribus
P ↑  Qd ↓
A perubahan
1.00 jumlah barang
yang diminta
D
Quantity of Ice-
0 4 8 Cream Cones
yst_stm

• Change in Demand
(perubahan permintaan)
• A shift in the demand curve,either to the left or right.
• Caused by any change that alters the quantity demanded
at every price – perubahan
jumlah barang
yang diminta pada setiap tingkat harga.
yst_stm

Pergeseran kurva demand :

• Consumer income
• Prices of related goods
• Tastes
• Expectations
• Number of buyers
Dx = D (Px, | pendapatan, P barang lain yang
berhubungan, selera, ekspektasi, jumlah pembeli)
pendapatan, P barang lain yang berhubungan,
selera, ekspektasi, jumlah pembeli  berubah yst_stm
Figure 3 Shifts in the Demand Curve
Price of
Ice-Cream
perubahan
Cone demand
disebabkan :
Increase
in demand
?????
Decrease
in demand
Demand
curve, D 2
Demand
curve, D 1
Demand curve, D 3
Quantity of
0 Ice-Cream Cones yst_stm
Copyright©2003 Southwestern/Thomson Learning

• Consumer Income
• As income increases the demand for a normal
good will increase – pendapatan ↑ 
permintaan ↑  kurva demand geser kanan.
yst_stm

• Consumer Income
• As income increases the demand for an inferior

good will decrease - pendapatan ↑ 
permintaan ↓  kurva demand geser kiri.
yst_stm

Consumer Income yst
Normal Good
Price of Ice-Cream
Cone
$3.00 An increase in
2.50 income...
Increase
2.00 in demand
1.50
1.00
0.50
D2
D1 Quantity of
Ice-Cream
0 1 2 3 4 5 6 7 8 9 10 11 12 Cones yst_stm
Consumer Income yst
Inferior Good
Price of Ice-
Cream Cone
$3.00
2.50 A decrease in
2.00
income...
Decrease
1.50 in demand
1.00
0.50
D2 D1 Quantity of
Ice-Cream
0 1 2 3 4 5 6 7 8 9 10 11 12 Cones yst_stm

• Prices of Related Goods

harga barang lain yang berhubungan
• When a fall in the price of one good reduces the demand
for another good, the two goods are called substitutes
– P barang A ↓  Q barang B yang diminta ↓
barang B : pengganti barang A
yst_stm

• Prices of Related Goods

harga barang lain yang berhubungan
• When a fall in the price of one good increases the

demand for another good, the two goods are called
complements - P barang A ↓  Q barang C yang
diminta ↑  barang C : pelengkap barang A yst_stm

Table 1 Variables That Influence Buyers
yst_stm
Copyright©2004 South-Western
Review
SUPPLY
• Quantity supplied is the amount of a good that
sellers are willing and able to sell.
• Law of Supply
• The law of supply states that, other things equal,
the quantity supplied of a good rises when the price of
the good rises – P ↑  jumlah barang yang
ditawarkan (Qs) ↑.
P ↑ ↓ Qs ↑ ↓ cp
yst_stm

SUPPLY
P ↑ ↓ Qs ↑ ↓ cp
Sx = S (Px, | P faktor produksi, teknologi, jumlah

penjual)
Sx = S (Px) ceteris paribus (P faktor produksi,

teknologi, jumlah penjual)  konstan/tidak
berubah
yst_stm

Ben’s Supply Schedule
tabel hubungan antara P dan Q yang ditawarkan
yst_stm

Figure 5 Ben’s Supply Schedule and Supply Curve
Price of
Ice-Cream
Cone
$3.00
2.50
1. An
increase
in price ... 2.00
1.50
1.00
The supply curve was drawn under the
assumption that all factors, except for price,
0.50 that influence the quantity supplyed is fixed.
kurva supply :
hubungan antara 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of
P dan Q yang Ice-Cream Cones
ditawarkan ceteris 2. ... increases quantity of cones supplied. yst_stm
paribus Copyright©2003 Southwestern/Thomson Learning

Market Supply versus Individual Supply
• Market supply
refers to the sum
of all individual
supplies for all
sellers of a
particular good or
service.
• Graphically,
individual supply
curves are
summed
horizontally to
obtain the market
supply curve. yst_stm

Shifts in the Supply Curve
• Change in Quantity Supplied

(perubahan dalam jumlah barang yang ditawarkan)
• Movement along the supply curve (pergerakan sepanjang
kurva).
• Caused by a change in anything that alters the quantity
supplied at each price (perubahan jumlah barang yang
ditawarkan pada setiap tingkat harga)
Sx = S (Px, | P faktor produksi, teknologi, jumlah
penjual)
Sx = S (Px) ceteris paribus (P faktor produksi,yst_stm
yst
Change in Quantity Supplied

Sx = S (Px) ceteris paribus
Price of Ice-
Cream Cone S
P ↑ Qs ↑ cp
C
$3.00 A rise in the price of
ice cream cones
results in a
movement along
the supply curve.
A perubahan jumlah barang
1.00 yang ditawarkan pada
setiap tingkat harga
Quantity of
Ice-Cream
0 1 5 Cones yst_stm

Pergeseran kurva supply :

• Input prices
• Technology
• Expectations
• Number of sellers
Sx = S (Px, | P faktor produksi, teknologi, ekspektasi,

jumlah penjual)
P faktor produksi, teknologi, ekspektasi, jumlah yst_stm
penjual  berubah Copyright © 2004 South-Western
• Change in Supply
• A shift in the supply curve, either to the left or right.
• Caused by a change in a determinant other than price.
Sx = S (Px, | P faktor produksi, teknologi, ekspektasi,

jumlah penjual)
P faktor produksi, teknologi, ekspektasi, jumlah yst_stm
penjual  berubah Copyright © 2004 South-Western
Figure 7 Shifts in the Supply Curve
Price of
Ice-Cream Supply curve, S3
Supply
Cone
curve, S1
Supply
Decrease curve, S 2
in supply
Increase
in supply
0 Quantity of yst_stm
Ice-Cream Cones
Table 2 Variables That Influence Sellers
yst_stm
SUPPLY AND DEMAND TOGETHER
• Equilibrium refers to a situation in which the

price has reached the level where quantity
supplied equals quantity demanded.
Equilibrium : Qs = Qd
yst_stm

• Equilibrium Price (Pe)
• The price that balances quantity supplied and quantity
demanded.
• On a graph, it is the price at which the supply and
demand curves intersect.
• Equilibrium Quantity (Qe)
• The quantity supplied and the quantity demanded at the
equilibrium price.
• On a graph it is the quantity at which the supply and
demand curves intersect.
yst_stm

Demand Schedule Supply Schedule
At $2.00, the quantity demanded is

equal to the quantity supplied!
yst_stm

Figure 8 The Equilibrium of Supply and Demand
Price of
Ice-Cream
Cone Supply
Equilibrium price Equilibrium

$2.00
Equilibrium Demand
quantity
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Quantity of Ice-Cream Cones yst_stm

Markets Not in Equilibrium

Markets Not in Equilibrium
Besanko
Equilibrium
• Surplus
• When price > equilibrium
price, then quantity supplied
> quantity demanded.
• There is excess supply or a
surplus.
• Suppliers will lower the price
to increase sales, thereby
moving toward equilibrium.

Equilibrium
• Shortage
• When price < equilibrium
price, then quantity
demanded > the quantity
supplied.
• There is excess demand or
a shortage.
• Suppliers will raise the
price due to too many
buyers chasing too few
goods, thereby moving
toward equilibrium. yst_stm

Besanko
Besanko
Equilibrium
• Law of supply and demand

• The claim that the price of any good adjusts to bring the
quantity supplied and the quantity demanded for that
good into balance (harga menyesuaikan S dan D).
yst_stm

Equilibrium
yst_stm

Figure 10 How an Increase in Demand Affects the
Equilibrium
Price of
Ice-Cream 1. Hot weather increases
Cone the demand for ice cream . . .
Supply
$2.50 New equilibrium
2.00
2. . . . resulting Initial
in a higher
equilibrium
price . . .
D
0 7 10 Quantity of
3. . . . and a higher Ice-Cream Cones yst_stm
quantity sold.
Besanko
Besanko
Equilibrium
yst_stm

Figure 11 How a Decrease in Supply Affects the Equilibrium
Price of
Ice-Cream 1. An increase in the
Cone price of sugar reduces
the supply of ice cream. . .
S2
S1
New
$2.50 equilibrium
2.00 Initial equilibrium
2. . . . resulting
in a higher
price of ice
cream . . . Demand
0 4 7 Quantity of
3. . . . and a lower Ice-Cream Cones yst_stm
quantity sold.
Equilibrium
yst_stm

yst_stm

Besanko
Besanko
Table 4 What Happens to Price and Quantity When Supply or
Demand Shifts?
yst_stm
GENERAL EQUILIBRIUM ANALYSIS: TWO MARKETS
Besanko
Kopi dan teh 

substitusi
S kopi ↓  D kopi ↑ 
P kopi ↑  D teh ↑ ; S
teh tetap  P teh ↑
S kopi ↓ karena ?
Besanko
Pasar CD dan pasar akses

internet.
CD dan akses internet 
komplemen.
Pajak penjualan dikenakan

pada CD  S CD ↓ ; D CD
tetap  P CD ↑  D akses
internet ↓ ; S akses internet
tetap  P akses internet ↓
Besanko
Summary
• Economists use the model of supply and demand to
analyze competitive markets.
• In a competitive market, there are many buyers and
sellers, each of whom has little or no influence on
the market price.
yst_stm

Summary
• The demand curve shows how the quantity of a
good depends upon the price.
• According to the law of demand, as the price of a good
falls, the quantity demanded rises. Therefore, the
demand curve slopes downward.
• In addition to price, other determinants of how much
consumers want to buy include income, the prices of
complements and substitutes, tastes, expectations, and
the number of buyers.
• If one of these factors changes, the demand curve shifts.
yst_stm

Summary
• The supply curve shows how the quantity of a good
supplied depends upon the price.
• According to the law of supply, as the price of a good
rises, the quantity supplied rises. Therefore, the supply
curve slopes upward.
• In addition to price, other determinants of how much
producers want to sell include input prices, technology,
expectations, and the number of sellers.
• If one of these factors changes, the supply curve shifts.
yst_stm

Summary
• Market equilibrium is determined by the
intersection of the supply and demand curves.
• At the equilibrium price, the quantity demanded
equals the quantity supplied.
• The behavior of buyers and sellers naturally drives
markets toward their equilibrium.
yst_stm

Summary
• To analyze how any event influences a market, we
use the supply-and-demand diagram to examine
how the even affects the equilibrium price and
quantity.
• In market economies, prices are the signals that
guide economic decisions and thereby allocate
resources.
yst_stm

PROBLEMS AND APPLICATIONS
1. “An increase in the demand for notebooks raises the quantity of
notebooks demanded but not the quantity supplied.” Is this
statement true or false? Explain.
2. Consider the market for minivans. For each of the events listed
here, identify which of the determinants of demand or supply are
affected. Also indicate whether demand or supply increases or
decreases. Then draw a diagram to show the effect on the price
and quantity of minivans.
a. People decide to have more children.
b. A strike by steelworkers raises steel prices.
c. Engineers develop new automated machinery for the production
of minivans.
d. The price of sports utility vehicles rises.
yst_stm e. A stock-market crash lowers people’s wealth.
3. Identify the flaw in this analysis: “If more Americans go on a

low-carb diet, the demand for bread will fall. The decrease in
the demand for bread will cause the price of bread to fall.
The lower price, however, will then increase the demand. In
the new equilibrium, Americans might end up consuming
more bread than they did initially.”
yst_stm
4. Consider the markets for DVD movies, TV screens, and tickets at

movie theaters.
a. For each pair, identify whether they are complements or
substitutes:
• DVDs and TV screens
• DVDs and movie tickets
• TV screens and movie tickets
b. Suppose a technological advance reduces the cost of
manufacturing TV screens. Draw a diagram to show what
happens in the market for TV screens.
c. Draw two more diagrams to show how the change in the
market for TV screens affects the markets for DVDs and movie
tickets.
yst_stm
5. Ketchup is a complement (as well as a condiment) for hot

dogs. If the price of hot dogs rises, what happens to the
market for ketchup? For tomatoes? For tomato juice? For
orange juice?
6. Over the past 20 years, technological advances have
reduced the cost of computer chips. How do you think this
affected the market for computers? For computer software?
For typewriters?
yst_stm
7. Dengan menggunakan kurva supply dan demand, tunjukkan
dampak dari kejadian berikut ini di pasar jaket.
a. Badai di kalifornia selatan menghancurkan tanaman kapas.
b. Harga jaket kulit turun.
c. Semua sekolah mengharuskan siswa di setiap pagi yang
dingin untuk berolah raga sebelum masuk sekolah.
d. Ditemukannya mesin jahit baru.
8. The market for pizza has the following demand and supply
schedules:
If the actual price in this
market were above the
equilibrium price, what
would drive the market
toward the equilibrium?
If the actual price in this

market were below the
equilibrium price, what
would drive the market
toward the equilibrium?
Graph the demand and supply curves. What
is the equilibrium price and quantity in this
Market?
yst_stm
9. Consider the following events: Scientists reveal that
consumption of oranges decreases the risk of diabetes and,
at the same time, farmers use a new fertilizer that makes
orange trees more productive. Illustrate and explain what
effect these changes have on the equilibrium price and
quantity of oranges.
yst_stm
10. Market research has revealed the following information
about the market for chocolate bars: The demand schedule
can be represented by the equation QD = 1,600 – 300P,
where QD is the quantity demanded and P is the price. The
supply schedule can be represented by the equation QS =
1,400 + 700P, where QS is the quantity supplied. Calculate
the equilibrium price and quantity in the market for chocolate
bars.
yst_stm
11. Because bagels and cream cheese are often eaten together,
they are complements.
a. We observe that both the equilibrium price of cream
cheese and the equilibrium quantity of bagels have risen.
What could be responsible for this pattern—a fall in the
price of flour or a fall in the price of milk? Illustrate and
explain your answer.
b. Suppose instead that the equilibrium price of cream
cheese has risen but the equilibrium quantity of bagels has
fallen. What could be responsible for this pattern—a rise in
the price of flour or a rise in the price of milk? Illustrate and
explain your answer.
yst_stm
D:
S:
D:
S:
Eq : D = S
79

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3

The Market Forces of Supply and Demand

Mankiw, N.Gregory. 1998. Principles of Economics.

Prof. Dr. Yunastiti Purwaningsih, MP

S dan D  equilibrium = keseimbangan pasar

Copyright © 2004 South-Western

• A market is a group of buyers and sellers of a

• The terms supply and demand refer to the behavior

Copyright © 2004 South-Western

• Sellers determine supply

Copyright © 2004 South-Western

Copyright © 2004 South-Western

Copyright © 2004 South-Western

Dx = D (Px) ceteris paribus (pendapatan, P

Copyright © 2004 South-Western

The demand curve was 1.50

• Market demand refers to the sum of all individual

Copyright © 2004 South-Western

Copyright © 2004 South-Western

• Change in Quantity Demanded

Changes in Quantity Demanded

Copyright © 2004 South-Western

Copyright © 2004 South-Western

Pergeseran kurva demand :

Copyright©2003 Southwestern/Thomson Learning

Copyright © 2004 South-Western

• As income increases the demand for an inferior

Copyright © 2004 South-Western

Copyright © 2004 South-Western

• Prices of Related Goods

Copyright © 2004 South-Western

• Prices of Related Goods

• When a fall in the price of one good increases the

Copyright © 2004 South-Western

Copyright © 2004 South-Western

Sx = S (Px, | P faktor produksi, teknologi, jumlah

Sx = S (Px) ceteris paribus (P faktor produksi,

Copyright © 2004 South-Western

Copyright © 2004 South-Western

paribus Copyright©2003 Southwestern/Thomson Learning

Copyright © 2004 South-Western

• Change in Quantity Supplied

Change in Quantity Supplied

Copyright © 2004 South-Western

Pergeseran kurva supply :

Sx = S (Px, | P faktor produksi, teknologi, ekspektasi,

Sx = S (Px, | P faktor produksi, teknologi, ekspektasi,

• Equilibrium refers to a situation in which the

Copyright © 2004 South-Western

Copyright © 2004 South-Western

At $2.00, the quantity demanded is

Copyright © 2004 South-Western

Equilibrium price Equilibrium

Copyright©2003 Southwestern/Thomson Learning

Copyright © 2004 South-Western

Copyright © 2004 South-Western

Copyright © 2004 South-Western

• Law of supply and demand

Copyright © 2004 South-Western

Copyright © 2004 South-Western

$2.50 New equilibrium

Copyright © 2004 South-Western

2.00 Initial equilibrium